A 100-Yen Dollar Can’t Fix Japan’s Woes, Says Citi’s Englander

By Mark Cranfield

The Japanese yen may drop to 100 against the U.S. dollar, but that still wouldn’t address “the long-term structural issues” in Japan’s economy, says Steven Englander, head of G-10 FX Strategy at Citibank.

European Pressphoto Agency

A trader works in front of a monitor displaying the current exchange rate of the Japanese yen against the US dollar at a foreign exchange brokerage in Tokyo.

Twenty years of neglecting the big issues facing an aging population won’t be solved by “printing more money,” Mr. Englander said in an interview on the sidelines of a conference in Singapore.

Indeed, the fact that Japan’s Prime Minister Shinzo Abe has resorted to using the yen as a tool to resuscitate the economy “shows the policy cupboard is empty,” Mr. Englander said.

Japan already has a network of under-utilized roads and bridges built by previous Liberal Democrat administrations, which used infrastructure spending as the preferred way to stimulate economic growth.

“Hopes that yet more fiscal stimulus will transform the prospects for Japan’s economy, or at least make a meaningful difference to GDP in the next year or so, are overdone,” says Julian Jessop,chief global economist of Capital Economics, in a research report.

Comments (5 of 6)

My goodness, even if the Yen goes to 100 or 120 vs. the Dollar, what's the big deal? That's about where it was before the US/Euro crisis. Draghi and others at Davos recently more or less declared the crisis over. If it's over, shouldn't the Yen be allowed to get back to pre-crisis levels without a lot of moaning from Merkel or Englader?

11:18 pm February 4, 2013

Anonymous wrote:

"Too much debt (24X govt rev), GDP pitiful at best"

I take it you're comparing general tax revenue of Y40tn plus and Y1,000tn of gov/regional/agency debt.
Japan's extra-ordinary budget (special purpose accounts based on gasoline tax, highway tolls, etc) is about double that of the general budget excluding transfers. More importantly, Japan's total private/household financial assets is about Y1,500tn, and Japanese sovereign debt is 90% plus owned by domestic investors, so Japan will be okay for the time-being. There is a reason why 10Y JGBs have the lowest yield among major economies (even after considering the negative inflation rate).

At the end of the day, the gov will do what it always does: (1) inflate its way out, (2) raise tax, and (3) try generate tax income from economic growth.

4:22 pm February 3, 2013

Anonymous wrote:

It's probably politically motivated? A weak Yen will damage another of China's export markets. They may not worry too much wether it hurts themselves, too.

8:57 am February 3, 2013

Jack Meehoff wrote:

Japan is toast. Too much debt (24X govt rev), GDP pitiful at best. Too many old people, not enough young people, ie falling birth rate. Japanese are the most Xenophobic people in the world . People are dissaving for the first time in Japan. China is happy to see you fail. Who is going to buy your debt. Their is no turning back, you have crossed the Rubicon. Japan needs to push the restart button.

4:29 am February 3, 2013

yasuaki torii wrote:

I have no prejudice to Mr. Abe,Aso cabinet, but rather feel sympathy to them. Why do they dare to take the helm ,when such a time? I am not a pessimist or a fatalist. Ti's a changing time in Japan, it's inevitable, whoever take the administration. See everywhere the civilization, see whenever once prosper economy, It will be human history. Pendulum needs time to swing to the other way. Yen(finance system), Population( aging, birthrate, immigration), industry structure(labor supply, remuneration, agriculture, resources,energy,)......you name it. Most important thing we (Japanese) needs is (including Mr.Abe,Aso) to recognize always changing world economy and start the life to commensurate with. It is a human and civilization history. Yen's fluctuation is almost nothing to do with it.

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